It's Paying For College Season, which means that some parents will inevitably be looking at alternatives to student loans. Popular options include using HELOCs, Roth IRAs, or even 401ks (yes... sadly). If you're considering using one of these alternatives, make sure you know the risks! I share more in my latest for Forbes with help from Lawrence Sprung, CFP®. #studentloans #financialaid https://lnkd.in/gW_u3m9V
As always a nice balanced piece from Robert Farrington and great cautions from Lawrence Sprung, CFP® I hope everyone reads between the lines and agrees that Federal student loans are the first and best option for students. Parents need to be careful when they borrower to close the gap. Retirement funds are for retirement and home equity for a rainy day and unforseen circumstances. Parents who need/want to borrow should consiser private lenders who often offer no-fee loans that you co-sign with your student so you can get off the hook when they get on their feet. State agencies, banks, credit unions, FinTechs and others offer them. Be wary of the federal PLUS loan, which has an origination fee, one interest rate for everyone, almost no credit tests and is the parent’s debt for life. Another option that should be avoided is credit cards. At 20-25+% interest rates this is be the most expensive way to pay for college — unless you are playing the points or cash back game and will pay the full balance the next month. Paying for college season can be anxious and draining. Families need need to think carefully about what today’s decisons will mean for their long-term financial well being.
Hopefully parents educate themselves before exploring these alternatives
Thank you for including Larry's thoughts in this important piece
Thank you for including my thoughts Robert Farrington
CFP®/CPA who speaks your language! I save near retirees $$$ so they (not government) spend their nestegg. Catholic values | Vegetable gardening | Italian cooking
6moRobert Farrington Great concise "head's up" suggestions and warnings here. One other softball for paying for college that many people miss: If your state allows a tax deduction for contributing to a 529, do not write that check to the university. First, contribute the max to your state's 529s to get the state tax benefit. Then, pay the college with the 529 money when it makes the most sense.